On August 10, 2007 La Jolla Group—the licensee of O’Neill, Lost, and Metal Mulisha apparel and accessories in the U.S.—announced that it’s entering into a licensing agreement with R…And Everything Else, Inc. (Rdot), the parent company of Rusty Surfboards and apparel, and will be adding Rusty apparel and accessories to its existing stable of brands.

The announcement comes just over a year after Rusty’s founder, Rusty Preisendorfer, sold the controlling interest in his namesake company—including the rights to the Rusty trademarks—to the brand’s Australian licensee, Vegas Enterprises, for an undisclosed sum.

When the sale finalized, C&C Companies, who alleges to hold the master license for Rusty apparel and accessories in the U.S. and other foreign markets, began reporting to Rdot/ Vegas Enterprises—a firm they originally hired.

In mid May, ten months after gaining controlling interest of the company, Rdot/ Vegas Enterprises sent out a press release alleging to have cancelled the licensing agreement with C&C Companies. In the release Geoff Backshall, President of Rdot says, “While C&C had helped bring Rusty to its current level, Rdot is now looking forward to taking the brand to new heights.”

The release also says that C&C would cease association with the brand and ship any remaining inventory by July 26, 2007.

C&C Companies responded with its own press release stating that it would be defending its licensing agreement in court. The release included this statement:

“Prior to their assumption of control over Rdot, Vegas sought to purchase C&C’s Rusty business interests, but C&C was unwilling to sell. Failing to purchase C&C’s Rusty business, we believe Vegas concocted a plan to acquire a controlling interest in Rdot in order to get rid of C&C by terminating C&C’s license on whatever grounds Vegas could fabricate.”

C&C Companies then sought an injunction against Rdot, and, after winning a temporary restraining order, the injunction was denied in court. “This by no means signifies that C&C has lost its case or that the dispute is over,” says Greg Weisman, C&C’s attorney and chair of Los Angeles-based firm Silver & Freedman’s Apparel Practices Group, “In fact, the injunction loss has zero effect on the ultimate adjudication of this case.

…Lost President Tim Garrett with Attorney Greg Weisman.

The allegations made in the lawsuit that the alleged termination by Rdot was wrongful continue. At this time there is no trial date set, but if I had to guess I’d say it would be sometime in mid-to-late 2008. C&C will get its day in court.”

in light of the suit Rdot has decided to enter into a licensing agreement with La Jolla Group and says it’s not worried about the pending court date. “There’s litigation outstanding on some issues to do with them backing out of the brand,” says Backshall. “They’re trying to make something out of what happened with the termination of the license, but we don’t see that they have any basis for going down that path. So good luck to them.”

This is no surprise to Weisman. “Rdot believes the agreement is validly terminated, and is acting as if it has,” he says. “C&C believes it was not validly terminated, but can’t continue with the license in the face of what Rdot is doing.”

Weisman elected not to comment about the agreement between Rdot and La Jolla Group. “I cannot comment on the news of an alleged grant of license to La Jolla Group as they are a client of mine as well,” he says.

Toby Bost, CEO of La Jolla Group’s brands didn’t comment on the litigation, but did offer information about La Jolla Group’s partnership with Rdot. “This situation came down to opportunity. It was too good of a deal to pass up,” Bost says. “Rusty is a legitimate player in Australia. They’re among the top four surf brands in the apparel sector, and have a solid infrastructure to support the operation. As a result, they have a lot to offer in order to re-launch the brand in North America. We’re going to partner with them to turn Rusty into a strong global brand.”

Bost believes that through joint marketing, advertising, and product campaigns Rusty will be able to cultivate a global consumer. “Partnering on key marketing expenses and budgets provides the opportunity to sign top team riders, produce global events, share research, and become more creative in reaching the masses,” he explains.

According to Backshall there were several offers on the table, but La Jolla Group was his first choice. “We wanted a licensee that had a great track record in this industry, and in particular someone that had some experience in reinvigorating a surf brand,” Backshall explains. “Look at where O’Neill’s apparel business was twelve years ago, it was languishing in the marketplace, it wasn’t going anywhere. What they’ve done to take that business from where it was to where it is, in our eyes, it’s an amazing result.”

A global design team will be working together to develop product according to Backshell. “Those guys {La Jolla Group} will have a design team there that’ll work with our designers here, as well as, some of the things that are being done by our other international licensees,” he adds. “The bulk of the sales and marketing team are still there, so they just move under the La Jolla umbrella, and La Jolla will add to that team as well.”

Charlie Setzler (below) has been promoted from his position as VP of sales at O’neill to President of Rusty.

When asked if there is a risk for La Jolla Group to be entering into the agreement, Backshall reiterates that he believes the licensing agreement with C&C has been validly terminated, adding this caveat: “They {La Jolla Group} have something written into the licensing agreement that protects them against any potential litigation that goes the wrong way,” he says. “That’s pretty standard.”

C&C Principals Dac Clark and Paul Carr see things differently. “We disagree that they in fact have validly terminated the license,” he responds. “We’re disputing their justification for termination and we’ve gone to the courts to get a resolution on that. At the same time, we have no interest in doing anything to hurt the brand or to hurt the future of the brand, so we have been cooperative with the new ownership, but by no means are we giving up our position. We hope that we get back our interest in the brand or are compensated for the wrongs we have alleged.”

Tags: C&C Companies, C&C Partners, La Jolla Group, License agreement, R Dot, rusty

This entry was posted on Friday, August 10th, 2007 at 1:11 pm and is filed under NEWS. You can leave a response, or trackback from your own site.